Saturday, 17 June 2017

Survivors of the fire in Grenfell Tower in Kensington lost everything except the clothes they slept in. They lost not just their clothes and possessions but also any cash they had and their bank cards. Any financial records such as insurance policies will also have been lost.

Banks
Access to your own money means establishing your ID. The banks all say they have procedures in place to enable customers with no documents to establish who they are. In some cases specialist staff will be available.

They will speed up the process of supplying debit cards. Barclays says it can do them on the same day and will take customers to a branch where that can be done.

The banks say emergency access to cash and if necessary overdrafts will be available to customers who need it.

Some banks will be opening local branches over the weekend.

Here are the bank helplines

Bank of
Scotland 0345 721 3141

Barclays
0345 734 5345

Coop 03457
212212

Halifax 0345
720 3040

HSBC 03456
092527

Lloyds 0345
300 0000

Nationwide
0800 917 23 93

NatWest 0161
451 0217

Royal Bank
of Scotland 0161 451 0218

Santander
0800 0156 382

Insurance
Residents who did have insurance should contact their insurer. People who may not remember who the policy is with should check their bank statements to find who they paid. Insurers should act swiftly to provide cash and meet claims. They understand it will be difficult for residents who have lost all their documents in the fire.

Grants
At least one in four households have no insurance for their possessions. In areas where incomes are low the proportion is higher. So it is possible that half or more of the survivors have no cover for the losses they have incurred.

The funds raised for residents are being administered centrally by the Charities Commission. People should apply locally or call the Red Cross on 0800 458 9472.

Government advice
There is a very comprehensive list of where to get help on the Government's support for people affected page. It includes benefits, physical injuries, exposure to smoke, mental health, psychological trauma, passports and immigration, driving licences, pets, and bereavement support. Also details of how to volunteer or give money.

Monday, 12 June 2017

Moving from the Treasury, which reigns in spending, to the Department for Work and Pensions, which spends more than any other department, is going to be a bit of a shock for the new Secretary of State, David Gauke.

There will be lots to do. But top of his his list has to be obeying the law.

Although we have had an election the law still applies during that period. And since 7 May the Secretary of State for Work and Pensions has been breaking it. Specifically section 27(2) of the Pensions Act 2014.

Until 11 June the law breaker was Damian Green - now promoted to First Secretary of State (for Game of Thrones fans think the Hand of May). From 4pm on 11 June it was David Gauke.

Review of state pension age
Section 27 of Pensions Act 2014 is headed 'Periodic review of rules about pensionable age' and says the Secretary of State must review state pension age from time to time and publish a report on the outcome of that review.

The first review under that section was done by the former CBI Director General John Cridland and was published on 23 May along with a parallel review by the Government Actuary.

John Cridland recommended bringing forward the rise in the pension age to 68. At the moment it is scheduled for 2044 to 2046 affecting people born from 1977. Cridland recommended bringing that rise forward by seven years to start in 2037 and end in 2039. That would affect people born in 1970 and later - those who are now in their later 40s.

The Government Actuary took a longer view and while not actually recommending anything, looked ahead to a possible rise to 69 in 2040-42 affecting people born from 1972 who are aged 45 and younger now. And then to the age of 70 by 2054-56 which would affect people born from 1985 who are in their early thirties now.

The law being broken
The Act was clear that the Secretary of State had to publish a report in response to that review. And it set out a timetable to do so. In a clause designed to prevent a government hesitating or putting off a decision that will be politically very difficult s.27(2) says unequivocally "The first report must be published before 7 May 2017."

It wasn't. So for each day from 7 May the Secretary of State was breaking the law. Damian Green broke it on each of 36 days until his term of office ended. And David Gauke is now breaking it every day that passes from 11 June.

Reasons given
The excuse from the Department for Work and Pensions was that on 23 April Parliament voted for a General Election and Parliament was subsequently dissolved on 3 May. So there was no Parliament - though there were of course Ministers - to consider such a report published before 7 May.

It said that a long term policy like this could only be decided by the next Government.

It also claimed that what is called 'purdah' prevented it being published. Purdah is the convention that once an election has been called no new policies are announced and civil servants do not carry out anything but routine work.

However, in another case on 27 April the High Court made it clear that purdah was merely a convention and did not override legal duties. It instructed the Government to publish a long-awaited report on pollution which the government had tried to defer until after the election. The Government obeyed.

Legal action
Two legal attempts have been made to force the publication of the report on state pension age. Neither has succeeded. The most thorough response was from the Government Legal Department on 26 May which said:

The Secretary of State did not consider he had breached the statutory provision

The report could not be completed now that an election was under way

Even if forced to respond the Secretary of State could fulfil his duty by a short report saying 'yes' or 'no' or 'some changes may be appropriate' which would be a pointless exercise.

The letter warned that any proceedings would be resisted. None were in fact pursued.

Imperative
But now there is a new Government and a new parliament there is no excuse for not complying with the law and issuing a full and reasoned report.

David Gauke must do so promptly as he will be in breach of the law every day until he does.

Saturday, 10 June 2017

Chris Grayling is Secretary of State for Transport. So he can perhaps be forgiven for not understanding the details of the current means-test applied to people who go into a care home. Perhaps less forgivable is not understanding the detail of a key proposal in the Conservative Manifesto on which he was re-elected on 9 June. But he got both wrong on Question Time on BBC One on the day after the election. Here is what he said and why it is wrong.

"The irony is there
was never such a thing as a dementia tax."That is true, though not ironic. But some people with dementia face - and will face - paying more for their care than others as they tend to need care for a lot longer than those with other illnesses in later life."The package compares
quite favourably with the situation at the moment." It doesn't. As I shall explain."Most people don't
understand that the situation today is that if you go into residential care and
you have no other financial means your house has to be sold there and then..."That is wrong for three reasons.First, if the person's need is primarily medical then the NHS will pay the whole bill without a means-test. A cash-strapped NHS will try to get out of doing so but it is the law that it should. Secondly, many people do not have to contribute to their care from the value of their home. If their spouse, partner or a relative aged 60 or more still lives in their home its value is exempt and no contribution has to be made from its value. That is also true if their child aged under 18 or a relative who is disabled lives there. There are other exemptions.

Thirdly, a person needing care who has to use the value of their home towards their care costs does not have to sell their home 'there and then' or indeed at any time while they are alive. Some choose to do so - I have estimated that number at around 19,000 a year - but no-one has to. Since 2001 they can ask for a deferred payment agreement and pay it from their estate when they die. Until 2015 the debt clocked up interest free. In April 2015 the right to a deferred payment scheme was put into statute and interest is charged on the debt as it accrues, currently at the maximum rate of 1.35% a year - to rise to 1.65% from July. The local authority may make some other charges of a few hundred pounds to set up the agreement."...and the money is
spent down to the last £23,000. That's the situation today."Once the person in the care home and the value of their own home is taken into account then its value is used up as the bill accrues. But very few people will spend it all down to the limit which is in fact £23,250. ONS says the average house price in England is £233,000 and the average cost of a residential care home in England is around £700 a week or £36,400 a year (Laing Buisson 2017). It would take five years nine months to use up all the value of the average home down to £23,500. Most people in a care home live two years or so. So very few will end up with only £23,250 left."And it'sbeen the case for the last ten, twenty, thirty years in this country."It has not. The paragraphs above take us back to 2001. Before that another legal provision enabled people simply not to pay their care bill. Until 2015 the local authority still had to provide the care and could take the money owed - again interest free - after they died. "What was brought
forward in the Conservative Manifesto actually took less from people than the
current system."Perhaps the biggest fib of all.The Manifesto plan is better in one respect only. It raises the £23,250 to £100,000. So anyone living in an average priced house in England would lose all its value bar £100,000 after three years eight months. That is far longer than most people live in a care home so for most it would make no difference from the present system. But for those who live longer than that time it would enable their heirs to inherit more. So it takes less in that limited way.However, it would make another major change which was not explicitly stated in the Manifesto but which both Conservative Campaign Headquarters (CCHQ) and a Conservative MP Chris Philp confirmed to me was the case. The plans would remove the exemption for the family home if a spouse, partner or elderly relative was still living there. So the value of the home would be taken into account in far more cases than at present. The home would not be sold to pay the bill until after the other person had also died. But its value would eventually be used. So the Conservative plans would take far more from many people than the present system.They would also take more from people who got their care at home rather than moving into a care home. For the first time the value of their own house would be taken into account while they - and of course their spouse etc - lived there. That was a new provision and would cost those people who owned their own home a lot more than the present rules. What about the proposals for a cap on the total cost anyone would have to pay?The cap was not, of course, mentioned in the Manifesto. Plans to have one were leaked to the press early in May before the Manifesto's launch on 17th. But it was not in the Manifesto and Ministers where wheeled out on the day it was launched to justify the lack of a cap in it. However, the outcry about the so-called dementia tax (and Grayling was right that there wasn't one) was so great that by the time the Welsh version of the Manifesto was launched five days later Theresa May announced "We will have an upper limit, absolute
limit, on the amount people will pay for care."

That was not mentioned in the Wales version of the Manifesto either. And no-one would say how much that cap would be but, we were told, it would be part of the consultation in a Green Paper after the election.

If the cap followed the plans of Andrew Dilnot - which were specifically rejected in the Manifesto as they "mostly benefited a small number of wealthier people"- it would not be an absolute cap. The reasons are complex but the cap of £72,000 proposed by the last Coalition government would have been effectively double that for most and the few who reached it would still have to pay a board and lodging charge of £230 a week (£11,960 a year) for life. My blog on the £72,000 cap explains the arithmetic.

However, Theresa May's phrase of an 'absolute cap' was repeated to me by Chris Philp in my Money Box interview on the Manifesto. I put to him that a Dilnot cap would not be a cap at all as it would leave an unlimited liability.

"Not an unlimited
liability...there will be an absolute cap and the
Prime Minister made that clear…the Prime Minister Theresa May was extraordinarily clear there will be an
absolute cap that will cover all of those liabilities."

That part of the interview starts at 8'20" into the programme.Chris Grayling concluded his remarks on Question Time by saying"We've got to learn
lessons about how that came across, how it was launched, about the
communication of it."Indeed. That is the truest thing he said.The rules here and the Conservative Manifesto plans apply to England. Care is a devolved matter in Scotland, Wales, and Northern Ireland where the rules are similar but different in detail.

There is an interesting analysis of the Manifesto plans on paying for care by the BBC's Nick Triggle10 June 2017vs 1.02

Friday, 2 June 2017

Money Box agenda Saturday 3 June 2017 BBC Radio 4 after the midday newsElection feverMy interviews with the political parties on their General Election Manifestos reaches its finale.Ian Blackford, the SNP work and pensions spokesman, talks to me about his party's plans for tax. Will the SNP support higher rate taxpayers paying more?The Conservatives would not provide a Minister or party spokesman to interview. Instead they put up Chris Philp, a backbench MP until the election was called and a member until then of the Parliamentary Treasury Select Committee. He talks to me about the state pension triple lock, the party's tax plans, and the care cap.Unfortunately UKIP was not able to put anyone up for interview. Its personal finance policies are set out on pp10-12 of its Manifesto.

BA regrets...but not that much
British Airways is facing calls this weekend to pay compensation automatically to the estimated 75,000 passengers hit by its computer problems over the Bank Holiday. It is hard to imagine the circumstances where anyone affected will not be due fixed compensation under a European Directive. Normally that will be €400 (£350) or €600 (£525) per passenger. But BA is insisting they all claim. At one time it was wrongly advising them to claim through their travel insurance. And for a while it said they could phone a BA helpline giving an 0844 number. That is contrary to rules about premium rate phone lines.Helen Dewdney from the The Complaining Cow explains your rights when a flight is cancelled or delayed. Listen and contactThat will fill our Radio 4 sandwich between the News and the News Quiz. And a rather better one than many BA Bank Holiday passengers got as they waited, and waited, and waited! Our best before date, as ever, is noon on Saturday and the programme is served up refried at 2100 on Sunday. Or it can be eaten fresh anytime on the marvellous BBC Radio i-Player.

Send us your ideas or problems you want us to look into through the ‘Contact Us’ tab. Or email moneybox@bbc.co.uk. The website also has background and further information on all the stories on Money Box and Money Box Live.

TV trailI will be trailing one item on BBC One Breakfast on Saturday. Usually it’s around 0840 but the time can and does change.2 June 2017

There is no point in cash ISAs for the vast majority of savers. They would pay no tax on their savings interest anyway. And best buy fixed term ISAs pay lower rates of interest than the rates paid on regular savings. So putting money in an ISA earns less than money put into a regular savings account. The only people who consistently do better by putting their money into a cash ISA are

top rate taxpayers (with incomes above £150,000 a year)

higher rate tax payers with incomes above £45,000 a year and many tens of thousands in cash ISAs

Tax deception
The deception at the heart of the cash ISA is this. For 95% of savers there is no tax saving to be had by putting their money into an ISA. That is because interest on savings is tax free for 95% of savers anyway.

Since April 2016 the first £1000 of savings interest is free of tax thanks to the new Personal Savings Allowance (what did the Editor of the Evening Standard ever do for us?). For those who pay higher rate tax the Allowance is £500 and the growing number of top rate taxpayers - with an income above £150,000 - get no Savings Allowance. But for the vast majority of savers who pay basic rate tax or none at all they get £1000 interest tax-free.

At today's low interest rates, savers would have to have more than £90,000 in cash savings in a best buy instant access account - RCI Bank paying 1.1% - to exceed their £1000 Personal Savings Allowance. If they put their money into a longer-term account - say a 2 year bond - then they would need around £57,000 in the best buy Charter Savings Bank which pays 1.76% before any tax was due on the interest. The Personal Savings Allowance is of course personal, so for a couple you can double those limits.

Those are best buys. But most people are not rate chasers. Many entrust their savings to the High Street banks. If you have your money in the promoted Aldermore instant access account paying 0.75% you would need more than £130,000 to pay tax on the interest. And you could put £2,000,000 into a Barclays 'best buy' instant access savings account paying 0.05% before the interest would attract tax.

So for the vast majority of savers who pay basic rate tax the interest paid on their savings is tax free outside an ISA.

But that key deception is just the first.

Rate deceit
The second deception is that even if tax is due you could earn more in a non-ISA account. That two year bond from Charter paying 1.76% is so far ahead of the nearest ISA account that money earns more in a best buy non-ISA savings account even after basic rate tax is taken off. Deduct basic rate tax from that 1.76% and you are left with 1.41%. But the best buy two year ISA is from Britannia building Society and pays just 1.25%. In fact every best buy fixed term ISA savings from one year to five years is better or the same in a non-ISA account after basic rate tax.

The table shows the best buys that are worth more or the same as a cash ISA.

Tax haven for the better off
The people who do better with an ISA than a regular savings account are higher rate taxpayers. They get a lower Personal Savings Allowance of £500 and get more interest in an ISA than the net after tax interest on a non-ISA.

Cash ISAs are for the better off. Higher and top rate taxpayers and those with at six figure sums in cash savings. They are no longer for the ordinary saver.

Helping the rich rather than ordinary savers was never the purpose of the cash ISA. It is time it was scrapped for future savings.

Friday, 26 May 2017

If you change your status from married to divorced you may find
your car insurance premium goes up. One listener tells us the best buy she was
offered by RAC rose from £582 a year to £919 after she told them she was no
longer married but divorced and changed the status of her (now ex-)husband as
second driver on the car. RAC now says it was a mistake – a ‘glitch’. And the
original insurer has now offered her insurance on the same terms. But whose
mistake was it? We reproduced our listener’s enquiry online with more than 30
firms. Most of them put up the best buy price by 20%-30%.

Tax rise

On 1 June, a week before the election, a tax rise begins which will
bring in an extra £850m a year for the Treasury. The tax on insurance premiums
rises that day from 10% to 12%. Insurance Premium Tax – which has now doubled
in two years – applies to general insurance which protects your home, its
contents, your car, and your pets. Altogether Insurance Premium Tax brings in around £5 billion a year.

Manifestos

Our series of interviews on election manifestos continues. This
week I talk to some of the smaller parties. Plaid Cymru leader Hywel Williams,
Liberal Democrat economics spokesman Vince Cable, and Molly Scott Cato MEP who
speaks for the Green Party on finance issues. Next Saturday is the last before
the General Election on 8 June when we hope to fill the remaining gaps in our
coverage of the party plans.

Rent asunder

Are rents falling? Rising? Or staying pretty flat? The answer, of
course, depends where you live. One national letting agent reports this week
that in four of the nine countries and regions of Great Britain rents charged
to new tenants have fallen over the last twelve months. In the other five they
have risen. If you average out the whole of Great Britain they are pretty flat.
But they are still hard to pay from low wages and help from the government in
Housing Benefit for working people has been cut. Shelter says many are
borrowing to pay their rent.

That will all make for a nice juicy filling for our 24 minute Radio
4 sandwich between the News and the News Quiz. Its best before date, as ever,
is noon on Saturday and it is served up refried at 2100 on Sunday. Or it can be
served up fresh anytime on the marvellous BBC Radio i-Player.

Send us your ideas or problems you want us to look into through the
‘Contact Us’ tab. Or
email moneybox@bbc.co.uk. The website also has background and further
information on all the stories on Money Box and Money Box Live.

I will be trailing one item on BBC One Breakfast on Saturday.
Usually it’s around 0840 but the time can and does change.

I once described commission as the cancer at the heart of the
financial services industry. In fact more than once. Many, many times. It took
years before the regulator took any notice. Not so much of me, but of the
growing evidence that commission caused bias in investment recommendations to
the detriment of consumers.

From 31 December 2012 commission was banned on all new sales of
investment and pension products. So I was shocked this week to read new figures
from the Financial Conduct Authority which showed that in 2016 retail
investment advice firms still earned £843m a year from commission. A lot of
this money is from ‘trail commission’ which was earned on sales before the 2012
ban. Trail commission was typically 0.5% of the money that had been invested and
was paid to the adviser for as long as the investment was kept. Nominally it
was paid by the investment firm. But of course ultimately it came from the
customer’s investments.

More than half of all investment advice firms now like to impose a
percentage charge on their clients directly – I call it a tax, they call it an
ongoing fee for services provided – typically of 0.5% or 1% of the wealth of
their clients. Altogether 57% of advice firms use this wealth tax as their sole
way of charging and another 10% use it as part of their charges. Only 16%
charge an hourly rate and another 16% charge a fixed fee.

More than eight out of ten advisers hide the payments from their
clients by using what are called ‘facilitated payments’. That means the adviser
does not send a specific bill which the customer pays. Instead the fee is taken
from the investment. In other words it is ‘facilitated’ by the firm where the
investments are kept.

Although the client has to be told what the fee is there is no
direct connection between the charge and its payment which disappears from the
investment and is passed direct to the adviser. No wonder advisers tell me that
customers do not care about the price. If they saw a bill and had to pay it directly
they might care a bit more.

Firms are successfully replacing the income they used to get from commission.
Total revenues of the 4970 firms which give investment advice have grown
strongly since it was banned on new sales. But commission still
represents a quarter of their income. Some of it is commission on products the
client buys without advice and there is some evidence in the figures that firms
are earning more from these non-regulated activities but the data is inconclusive.

Commission was not banned in mortgage or insurance sales. The new FCA
data reveals that around 80% of the income of from mortgage and insurance sales
comes from commission. Insurance – often sold on a restricted basis even by
independent financial advisers – is the big money-spinner. In 2016 firms made a
total of £15.1bn from selling insurance compared with £3.7bn from investment
advice. Mortgage sales came in a poor third at £1bn.

The figures the FCA published this week were based on returns made
by all the firms which sell us regulated financial products – investments
(including pensions), mortgages, and insurance. download the Data Bulletin and the tables that underpin its graphs.